Assume there are only two firms in the wine industry. Assume these firms cooperate and that they only compete with regards to advertising. Both firms know they face the following payoff matrix. Assume this is a one-period game.
Firm A
Increase Advertising Decrease Advertising
Increase 100,100 10,200
Advertising
Firm B
Decrease 200,10 150,150
Advertising
Assume the payoffs are the firm's profits (in millions of dollars).
(A) Given the above payoff matrix, what strategies will Firm A and Firm B pursue?
(B) Assume now that the game lasts 10 periods. What strategies will the firms pursue?
(C) Assume the game never ends. What strategies will the firms pursue?
Assume there are only two firms in the wine industry. Assume these firms cooperate and that...
Firm A (Alistair's) and Firm B (Baine's) are the only firms
selling luggage in the upscale town of Adelaide. Each firm must
decide on whether to increase its advertising spending to compete
for customers. If one firm increases its advertising budget but the
other does not, then the firm with the higher advertising budget
will increase its profit. The table below shows the payoff matrix
(the profits are in millions of dollars) for this advertising
game.
Find the Nash Equilibrium...
There are two firms, Cope and Peski, in an oligopolistic industry. Each firm must decide whether or not to advertise during the Super Bowl this year. The diagram below represents the matrix of expected profit payoffs for each firm depending on which of the four possible outcomes becomes reality. The first number in each cell represents the expected profit for Peski given the relevant combination of strategies for each firm. The second number in each cell represents the expected profit...
Declining Industry: Consider two competing firms in a declining industry that cannot support both firms profitably. Each firm has three possible choices, as it must decide whether or not to exit the industry immediately, at the end of this quarter, or at the end of the next quarter. If a firm chooses to exit then its payoff is 0 from that point onward. Each quarter that both firms operate yields each a loss equal to -1, and each quarter that...
2. Suppos e there are two firms in an oligopoly, Firm A both firms charge a low price, each earns and Firm B. If $2 million in profit. If both firms charge a high price, each earns $3 million in profit. If one firm charges a high price and one charges a low price, customers flock to the firm with the low price, and that firm earns $4 million in profit while the firm with the high price earns $1...
Please help for the answer :)
62 6. Consider the market for sneakers with two firns, Like and Fuma. Both firms have to simultaneously decide between two strategies: Cooperate or Cheat If both firms choose Cooperate, they share the monopoly profit with each of them making $80m If one firm chooses to Cheat it makes a profit of $160m, while the other firm which chooses to Cooperate incurring a loss of $40m If both firms Cheat, they both make zero...
(4 points) Two firms compete in a declining industry. Each firm has three possible choices: 1) exit the industry immediately (and gets a payoff of 0); 2) exit at the end of this quarter; 3) exit at the end of next quarter. Each quarter, if both firms are operating, each incurs a payoff of -1; if a firm operates along, it yields a payoff of 3. a. Write down this game in normal-form representation (matrix-form is fine) b. Are there...
Identify the definition for each term listed below from the following list. 1. The study of how people make decisions where attaining goals depends on interactions with others. 2. A table that shows the payoffs each firm earns from every combination of firm strategies. 3. An agreement among firms to charge the same price or otherwise not to compete. 4. A strategy that is the best for a firm, no matter what strategies other firms use. 5. A situation in...
The payoff matrix below shows the payoffs (in millions of
dollars) for two firms, A and B, for two different strategies,
investing in new capital or not investing in new capital.
This game is an example of a:
Select one:
a. cartel.
b. credible promise.
c. prisoner's dilemma.
d. game with multiple equilibria.
Firm B Invest Not invest 20 for A 20 for B 70 for A Invest 5 for B Firm A 5 for A 50 for A Not...
1. Let's make a deal. Now suppose the two firms could agree to share technology secrets and split the monopoly profits. If they both cooperate, they each earn 2, and if they both defect, they each earn 1 (payoffs are in billions of dollars). However, if one firm cooperates, the other can defect and earn 3, while the other earns 0. (a) Write down this prisoner's dilemma with a payoff matrix. (b) If the firms interact just once (1.e. the...
Consider the car industry, in which Ford and GM are the two dominant firms. (To keep the analysis simple, just forget about all the others.) The market size is $9 billion. Each firm can choose whether to advertise. Advertising costs $1 billion for each firm that chooses it. If one firm advertises and the other doesn't, then the former captures the whole market. If both firms advertise, they split the market 50:50 and pay for the advertising. If neither advertises,...